Play Updates, Monday, 08/25/2008

In Play Updates and Reviews

by James Brown

Call Updates

Arch Coal - ACI - close: 53.88 chg: -1.73 stop: 49.95

Coal stocks were hit hard today as traders sought to lock in gains from last
week as the broader market posted a steep decline. ACI slipped to its
exponential 200-dma before bouncing. Volume was very light. Today's session also
produced a bearish engulfing candlestick pattern. We are not suggesting new
bullish positions. Our target is the $58.00-60.00 zone. The P&F chart is bullish
with a $68 target.

ADBE was unable to avoid the market-wide sell-off. Shares lost 2.7% and dipped
to short-term support near $43.50. Today's move only reinforces what looks like
a failed rally near $45.00 and its 10-dma last week. We would seriously consider
an early exit right here! However, our stop loss is already at $43.34 (breakeven
on the stock) and ADBE did manage to hold the $43.50 mark. Readers should expect
ADBE to hit our stop loss if the NASDAQ continues lower tomorrow. We are not
suggesting
new bullish positions in this stock. Our target is the $47.50-50.00
zone. The Point & Figure chart is bullish with a $71 target.

Natural gas stock CHK spent Monday's session churning sideways and actually
closed higher. We would wait for a new move over $49.00 before considering new
bullish positions. More conservative traders might want to tighten their stops
toward today's low (47.11). We have two targets. Our first target is $52.00. Our
second target is $54.85. FYI: As expected CHK produced a brand new P&F chart buy
signal that now points to a $62 target.

Readers shouldn't be surprised to see profit taking ITRI. We warned investors
over the weekend that the stock had stalled just under resistance. The trend of
higher lows is still in place but momentum is waning a bit. We're not suggesting
new positions at this time. We've set two targets. Our first target is $105.75.
Our second target is $109.90.

Our bullish play in RIMM is not looking healthy here. Shares were hammered for a
3% loss and the stock fell back toward its 100-dma. Several days ago we had
closed our previous RIMM play when it looked like shares were poised to break
support near $125.00. Now it looks like RIMM is set to retest the $125 mark. We
would consider buying a bounce near $125.00 but keep in mind the short-term
technicals are starting to roll over into bearish signals and last week's high
could be considered
the second peak in a double-top pattern. We have two
targets. Our first target is $143.50. Our second target is the $155.00-160.00
zone. However, readers should expect RIMM to encounter some resistance in the
$145-150 area.

Today's sell-off may have really gotten traders attentions - at least those
traders still here and not on summer vacation. The VIX rallied more than 11% but
the trend of lower highs has not yet been broken. We have been suggesting that
readers wait for a new rally over 22.50 to buy calls again. We're betting that
the market will see another sharp sell-off and investor fear will rise enough to
push the VIX toward 30.00 and all before the October option expiration. Our
target is 29.75
but readers might want to consider scaling out of positions in
the 28-29 region.

Put Updates

Bank of Amer. - BAC - cls: 28.96 change: -1.25 stop: 31.55

Financials were a real weak spot in the market today. Shares of BAC gave back
all of Friday's rally. There is still potential support at the 50-dma but
today's move looks like a new entry point for bearish positions. We have two
targets. Our first target was $28.00, which has already been achieved. Our
second target is $25.50.

CMG lost about 2.6% on Monday and almost closed under the $70.00 level. Over the
weekend we suggested a move under $71.00 or $69.00 as a new entry point and that
still holds true. The MACD on the daily chart is very close to a new sell
signal. We have two targets. Our first target is $65.50. Our second target is
$61.00.

More aggressive traders will want to consider buying puts on MICC following
today's 2.6% drop and close under $80.00. We are going to stick to our original
plan and use a trigger at $78.49. If triggered we're listing two targets. Target
number one is $75.05. Target number two is $72.50.

The RKH regional bank HOLDRs erased Friday's gain with today's 3.3% reversal.
The move today looks like another entry point to buy puts. More conservative
traders may want to tighten their stops toward the $102 region. We have two
targets. Our first target is $91.00. Plan to exit all or most of your position
there. We'll set an aggressive, secondary target at $86.00. FYI: The top three
holdings in the RKH are JPM (19%), WFC (13.6%) and WB (10%).

Weakness in financials was around the world and Brazilian bank UBB lost 2.7%. We
are still waiting for a breakdown under support and we're not ready to give up
just yet. Our suggested entry point to buy puts is at $112.50. If triggered our
target is the $102.50-100.00 zone. FYI: More nimble traders may want to switch
to bullish strategies if UBB can bounce above the $123.00 mark.

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call
and an OTM put on the same stock. The strategy is neutral. You do not care what
direction the stock moves as long as the move is big enough to make your
investment profitable.)

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Lehman Brothers - LEH - close: 13.45 chg: -0.96 stop: n/a

News that the Korean government cautioned Korean banks against making any big
acquisitions in "overseas financials" (a.k.a. LEH) sent shares of LEH to a 6.6%
loss. We don't see any changes from our previous comments and we're not
suggesting new strangle positions. We have four weeks left before September
options expire and need to see LEH significantly above $24.00 or under $10.00.
The options we suggested were the September $24.00 calls (LYH-IR) and the
September $10.00
puts (LYH-UB). Our estimated cost is $2.15. We want to sell if
either option hits $3.50 or higher.

Dropped Calls

Illumina - ILMN - cls: 89.97 chg: -1.36 stop: 89.45

Over the weekend we tightened our stop loss on ILMN to $89.45. Midday Monday
shares of ILMN had dipped to $89.09 hitting our stop and closing the play. The
long-term trend on ILMN Is still bullish. A bounce near $87.00 or a dip (or
bounce) near the 100-dma near $83.00 might be a new bullish entry point in ILMN.
Buying dips near the 100-dma has been a good entry in the past.